Estonia is an unlikely land of cutting-edge technology

Dec. 24, 2013
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Tallinn, Estonia. / K. Hjelmgaard, USA TODAY

by Kim Hjelmgaard , USA TODAY

by Kim Hjelmgaard , USA TODAY

TALLINN, Estonia - A land teeming with forests and lakes and technology start-ups.

"If you don't have your own app, you are not popular in Estonia," says Jane Muts, the manager of Garage48, an all-purpose hub that provides facilities and networking opportunities for entrepreneurs in the capital, Tallinn.

Estonia is about the same size as the Dominican Republic, and it has a mere 1.3 million people, yet a combination of factors including a dynamic approach to e-governance, an aggressive push for technology to be taught in the classroom from a young age and a serendipitous infrastructure legacy following independence from the former Soviet Union in 1991 have helped push this 50%-forested nation on the north eastern fringe of Europe into the start-up big leagues.

According to a recent check of AngelList, a website that aims to connect investors with entrepreneurs, there are 123 active start-ups in Estonia. This compares to about 835 in Germany and 2,642 in the United Kingdom, both nations with far higher populations. While that may not sound like a huge number, in fact on at least one measure - start-ups per capita - Estonia has about the same number of companies in the works as the United States, seen as the gold-standard country for entrepreneurs to grow businesses and achieve success.

The nation's technology sector is a little engine that's huffed and puffed and realized it can.

"After independence, there was this clean slate in Estonia, and the authorities focused very quickly on Internet technology and then the country had a big success story with Skype, which also quickly became an example for people," says Mike Reiner, the founder of Start-Up WiseGuys, a business-accelerator program for young Estonian companies.

If Skype - bought by Microsoft in 2011 - is Estonia's poster child for start-up tech success, TransferWise, Fortumo, GrabCAd, Weekdone and dozens of others are just some of the child-wonder's progeny.

"This entire country has felt held back in some way," says Chris Brown, also from Start-Up WiseGuys. "It felt that (during Soviet times) it was artificially restrained. The start-up world has been Estonia's shortcut to finally be reintegrated where it envisions itself. It doesn't have enormous natural resources. It couldn't just Norway its way into success by striking oil," he says.

A particularly virulent cyberattack in 2007 eventually blamed on Russia that disabled the websites of banks, newspapers, private companies and even government ministries in Estonia is often cited as motivation for reinforcing the need for electronic prowess.

Also playing a role in putting the "E" in "E-stonia," has been the nation's president, Toomas Hendrik Ilves, a self-confessed technology guy, who happens to be from Estonia via Leonia, N.J., where he spent time as an American teenager.

Ilves disputes the idea that the time he spent in the U.S. has had much of an effect on his governing style or his support for the Estonia's tech ecosystem, but he acknowledges that an early start with coding and computers learned at his schools in the Garden State have played a role in his thinking about Estonia. He also says that despite being a world-class place to be an entrepreneur, Estonia still suffers from a kind of geographic prejudice.

"We're still looked at as if we're poor, we were under Soviet rule, all that," Ilves tells USA TODAY.

"In many ways the direction Estonia was traveling, with an emphasis on the tech sector, was already there when Ilves came to power," Estonian Taavet Hinrikus, Skype's first employee, says of the president. "But he has certainly been good at helping us stay on the path."

Still, there's no question that little Estonia is turning heads.

"Estonia's use of cyberspace is really something quite extraordinary," says Michael Schmitt, a law professor at the U.S. Naval War College in Newport, R.I., who is also a senior fellow at NATO's Cooperative Cyber Defence Centre of Excellence in Tallinn. "For the last four years I have been coming to Estonia at least four times a year. There is not one scintilla of doubt that life here is easier than in the U.S. in terms of leveraging cyber-capabilities."

Its status as a start-up nation is also sinking in at home.

"Oh, you are a journalist, probably here to write about our start-ups," a man selling CDs on the streets of Tallinn who wanted to be identified only as Mr. Music, told USA TODAY in early December. "We get a lot of that," he says.